The Hastings Standard Published Daily. FRIDAY, JULY 3, 1896. THE BANKING INQUIRY.

Hastings Standard, Issue 58, 3 July 1896, Page 2

The Hastings Standard Published Daily.

FRIDAY, JULY 3, 1896. THE BANKING INQUIRY.

For the cause that lacks assistance, For the wrongs that need resistance, For the future in the distance. And the good that we can do.

The Premier has succeeded uncommonly well in steering his party to victory ; he has practically carried his original motion, although it has been amended. The whole debate of Tuesday last turned upon the second clause of the order of reference which reads : " To ascertain what amounts have been written off since the Ist day of January, 1888, and what led to such writing off; and to deal with all such other matters as the Committee deems necessary or expedient in {Jhjfe|P?emises. Provided that the not be empowered to inquire into the ordinary business of persons or companies doing business with the P>ank of New Zealand, excepting so far as relates to such writing off and what led to the same." Those opposed to this clause contended, that there would be great harm done the Bank of New Zealand if the Committee had pewer to investigate the accounts, to which the Ministerial party replied that it would have no such effect. Let us examine both sides of the question, and see to what extent each side is justified in its contention. According to the Premier, the Bank of New Zealand is the strongest institution south of the equator, and this we endorse absolutely, but we must add, paradoxical though it may seem, that its very strength is its weakness. The Bank of New Zealand derives its strength from the enormous credit granted to it by the State ; but for this strength the bank has to pay an enormous tax by way of interest. The colony has found £2,500,000 of trading capital on which the bank has to pay annually £97,000, and this sum has to come out of profits. Besides this, £50,000 a year has to be paid to the Assets, Realisation Board, and if we include the interest on fixed deposits the animal outgo of the bank will be seen to represent a very large sum. The bank is strong because it has a large amount of trading capital, and weak because there is, scarcely a .pound in its till which is not borrowed money. So long as the bank retains its customers and finds productive employment lor

its money it is strong, but the moment it loses its clients and business slackens, the bank will become the most hopelessly weak of our banking institutions.

The State having involved itself with the Bank to an enormous extent, it becomes the duty of the State at all hazards to conserve the interests of the institution, and to do nothing directly or indirectly to injure it ; above all care should be taken that the public confidence, not merely in the stability of the bank, but also in the efficiency and general conduct of the management of the bank, is not shaken. Will the interests of the Bank be safeguarded if full effect is given to the clause quoted above ? There is to be an examination of the accounts of customers from a certain date to the present time, and the principal object of the examination is to make public the names of those persons who® accounts have been written off wholly or partially during the period imder review. Of course it is stated in the clause that other accounts are not lo be enquired into and probably this will be strictly carried out. But this point suggests itself, if it is competent for the present Parliament to inquire into the writing off of accounts extending over a period of about nine years past, is there anything to prevent Parliament ten years hence making an inquiry as to the bills discounted, or overdrafts granted to customers say from Ist January, 1888 to the date of the inquiry. If Parliament has power to inquire into one thing it surely has the power to inquire into the matters wo suggest, and if this is admitted those doing business with the bank to-day would then have their private affairs exposed. Every business-man knows that the first law of business is secrecy. Almost the first injunction to every lad entering an establishment, be it a mercantile place of whatsoever kind, is to observe secrecy as to the matters relating to the business. Every bank officer is sworn to secrecy and rightly so. But Parliament is to break thi< fundamental law of the commercial world, and some members would have us believe that 110 harm will result. We decline to believe it. Clause 2 of the order of reference is destined to cause this colony a great deal of mischief, because it will do a vast amount of harm to an institution whose promissory notes we have backed and which we shall have to pay in the event of default. It is stated that already several valuable customers of the bank have left it, and we fancy when the committee gets to work and the evidence given before that committee is published far and wide there will be a regular stampede of good accounts from the Bank of New Zealand. There is not the slightest need of enquiring into what happened in 1888 or any other year. It is admitted that in 1894 the Bank of New Zealand was insolvent, and to be told now that the writing off of such and such accounts was the cause will not help us or satisfy the country, and the only reason we can see for making such an inquiry is to furnish certain politicians with material for slinging at their opponents. The fact that Mr so-and-so's account was' written off £20.000 in 1888, being made public now will not justify any of the criminal acts of last year. The country wants to know of the peculiar events of 1894 and 1895, and full details must be furnished. €lauise % quoted above is a huge mistakifiMfebscures the main issue. We see danger in the inquiry as it is now proposed to be conducted, and we should not be surprised if grave events follow.